Henry Dunning Macleod.

A dictionary of political economy: biographical, bibliographical ..., Volume 1 online

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was finally withdrawn from circulation.

201 . But the old evils of clipping and counter-
feiting were not put down. The mtroduction oi
the null had given a more accurate circular form
to the coin, but it was executed in such a manner,
that it was still possible to file away about 9 or
12 grains of metal without much danger of dls-

Digitized by




covery, from the distance at which the letters
were placed from the edge. The Rev. Peter
Vallavine, Vicar of Monkton, says in his Ohser*
vations on the Cttrrent Coin of this Kingdom, 1742,
that the shillings were deficient from 6 to 1 1 per
cent., and the sixpences from 1 1 to more than 22
per cent., and besides that, were extremely scrace.

202. It may seem somewhat remarkable that
after the experience the government had had of
the miseries inflicted upon the nation by suffering
the coinage to fall into a degi-aded state, they
continned to pay no attention to it. On the ac-
cession of George III., in 1763, the gold and silver
money was found to be in a very bad state. The
crown pieces entirely disappeared, though upwards
of a million and a half of pounds had been coined
since the time of William III. The half-crowns
were extremely scarce, although during the same
period there had been coined to the value of
£2,329,370. The shillings and sixpences were
in a shameful state, and had lost from a sixth to
a fourth of their value. All signs of the impres-
sion on them had vanished. AH the good coins
bad been exported, or melted, in consequence of
the erroneous valuation of the gold and silver coin,
and no bullion was brought to the Mint to be
coined, because it would have been a great loss
to do so, even although it was coined for nothing.
The gold coinage was also becoming much depre-
ciatea. It was very much clipped and filed. The
only remedy tried for some time, was the old
futile one of issuing a proclamation against the
practice. The state of the coinage continually
got worse. In 1 77 1 , it was said that three-fourths
of the silver in circulation was base. The guineas
were sent over to Holland to be filed, and then
returned and put into circulation. Even the
copper coinage was as bad. A statute was passed
to make counterfeiting the copper coinage felony.
The sums allowed for prosecuting offences against
the coinage were trebled. In 1773, it was enacted,
statute 1773, c. 52, that any person to whom gold
coin should be tendered which he should suspect
to be counterfeit, might cut, break, or deface such
piece. If it was bad, the offerer should bear the
loss, if not, the person who defaced it must take
it at the rate it was coined for. All the officers
of the Treasury were ordered to destroy all gold
coins offered them in payment, which were below
a certain weight. At the same time the Bank
gave notice that it would buy any quantity of
such defaced coin, in parcels of not less than fifty
guineas, at £3 17s. lO^d. the ounce. In 1774, an
Act was passed to prevent the importation of
debased and depreciated silver coins.

203. It was further enacted that no tender of
the silver coin of the reidm of any sum exceeding
£25 at any one time, should be legal tender
within Great Britain or Ireland, for more than its
value by weight at the rate of 5s. 2d. per ounce.
The Act wafi to endure till the Ist day of May
1776, and to the end of the then next session of

204. The state of the gold coinage could no
longer be overlooked. The government proposed
that all the deficient gold coin should be called in
and recoined. That a compensation should be
made to the holders of such deficient gold coin
under certain regulations ; and that aft^ the re-
coinage, the currency of the gold coin should in
future be regulated by weight as well as by tale.


in accordance with the ancient laws of the king-
dom, and that the several pieces should not be
legal tender, if they were diminished by any
means below that weight. The king having ap-
proved the plan, recommended to Parliament the
consideration of the state of the gold coinage in
very earnest terms. Ue said that the diminution
which that coin had suffered, and the rapid pro-
gress the mischief was daily making, was truly
alarming, and that it was essentially necessary
for the credit and commerce of the country, that
the gold coinage should be put on a good footing.
Every one agreed that a re-coinage was indispen-
sable, and had long been required to prevent the
fraudulent diminution of the gold coin, which had
been carried to a greater excess than had ever
been known before. But it was by no means
equally agreed upon whom the loss attending it
should fall. According to the Act, the loss fell
upon the immediate possessors of the gold coin,
and these were chiefly the great money holders
and bankers, and consequently it entail^ a great
loss on these individuals. They of coarse or-
ganised a strong resistance, and declared that as
they were obliged to hold money for others, and
had received it at its nominal value, upon the
public faith, and under the sanction of government,
it was oppressive and unjust to make the whole
loss fall upon them, to make good to the public
the immense loss they had sustained through the
remissness of government, in not enforcing the
laws, until the enormity reached so greai a height
as to be thought beyond their controL

The Minister, however, thought otherwise.
The extent of the evil and the necessity for a new
coinage were undeniable. The charge of injustice
he did not admit. Ue said the loss had fallen
where it could best be borne, upon those who had
been gainers by the situation, and who always
profited by the public money. That it wafi in
truth a tax upon property, and upon that ^[>eciea
of property which was exempt from many others.
That if a general tax had been laid on to make
good the deficiency, it would have been a very
heavy charge to the public, and opened the door
tor innumerable frauds, as had happened in the
reign of William liL, on calling in and re-coining
the silver money.

205. On the 13th of May, a conference was
held between the two Houses of Parliament, upon
the subject of the new coinage, in which they
agreed, and resolved to address the King.

They agreed to advise the king that all guineas
weighing less then 5dwts., 8 grains., all half-
guineas weighing less than 2 dwts. 16 grains, and
all quarter guineas weighing less than 1 dwt. 8
grains should be called in and received according
to the standard of the Mint, both in weight and
fineness, as quickly as could be done. That the
public should bear the loss arising from the de-
ficiency and recoinage of the said guineas, pro*
vided it did not exceed the rates settled by the
commisslonei's of the Treasury, and provided they
should be offered in payment to the receivers and
collectors of the public revenues, or should bo
brought to such places as the king might appoint
for the exchange of them, within certain times.
They advised the king to issue a proclamation to
limit a time when such coins as were more defi-
cient than the quantity stated should cease to be
current. An Act was passed in accordance with

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this address, by which all receiyers of crown
rerennes were ordered to receive all gnineas
tendered to them at the valne they were coined
at, provided their weight did not fall below the
quantity named in the proclamation. It was
nirther resolved, that the public should bear the
loss arising from the recoinage, and the Commons
voted £250,000 for this purpose.

206. On the 24th of June, a proclamation was
Issued prohibiting all guineas under 5 dwts. 8 grs.
to be current, and other gold coins in proportion.
OfScers were appointed at a considerable number
of the principal towns, to exchange the deficient
money for other money of the legal weight. The
officers of the mint were ordered to prepare weights
exhibiting the standard weights of the coins,
and to stamp all weights brought to them, which
should be found in conformity with the standard
ones. This plan was immediately carried into
execution, and was attended with perfect success,
and no more complaints of deficient guineas were
heard until the suspension of cash payments by
the Bank, in 1797. The total expense, however,
considerably exceeded the estimate. In 1774,
£250,000 were granted for the expenses of the
recoinage; in 1775, £69,770; in 1776, £92,421 ;
and in 1778, £105,227, making £517,320 in all.
Grold being now the medium of payment, the
same phenomenon was exhibited as in the recoinf^e
of the silver money in the reign of William III.
The foreign exchanges had been unfavourable in
consequence of the deterioration of the gold coin-
age. As soon as that was restored to its standard
weight, the foreign exchanges became favourable.

207. Prom want of a clear apprehension of
the great principle that ^ood and bad coin cannot
circulate together, but that the good will be ex-
ported, Adam Smith has misunderstood the real
cause of the drain experienced by the Bank of
England during this period. He says, (Wealth
o/NationSj B, IL, C. ILj On Metallic and Paper
Money, J — *' By issuing too great a quantity of
paper, of which the excess was constantly return-
ing, in order to be exchanged for gold and silver,
the Bank of England was, for many years together,
obliged to coin gold to the extent of between
£800,000 and £1,000,000 a year, or at an average,
about £850,000. For this great coinage, the
bank (in consequence of the worn and degraded
state into which the gold coin had fallen a few
years ago) was frequently obliged to purchase
gold bullion at the high price of £4 an ounce,
which it soon after issued in coin at £3 17s. lO^d.
an ounce, losing in this manner between 2^ and 3
per cent, upon the coinage of so very lar^ a sum.
Though the bank therefore paid no seignorage,
though the Government was properly at the ex-
pense of the coinage, this liberality of Govern-
ment did not prevent altogether the expense of
the bank.

'* The Scotch banks, in consequence of an excess
of the same kind, were all obliged to employ
constantly agents at London to collect money for
them, at an expense which was seldom below 1^
and 2 per cent. This money was sent down by
the wagon, and insured by the carriers at an
additional expense of f per cent., or 15s. in the
£100. These agents were not always able to
replenish the cofiisrs of their employers so fast as
they were emptied. In this case the resource of
the banks was to draw upon their correspondents


in London, bills of exchange to the extent of the
sum which they wanted. When these corres-
pondents afterwards drew upon them for the
payment of this sum, together with the interest
and commission, some of these banks, from the
distress into which their excessive circulation had
thrown them, had sometimes no other means of
satisfying this draught, but by drawing a second
set of bills, either upon the same or upon some
other correspondents in London, and the same
sum, or rather bills for the same sum, would in
this manner make sometimes more than two or
three journeys; the debtor bank paying always
the interest and commission upon the whole
accumulated sum. Even these Scotch banks,
which never distinguished themselves by their
extreme imprudence, were sometimes obliged to
employ this ruinous resource.

*^ The gold coin which was paid out either by
the Bank of England, or by the Scotch banks, in
exchange for that part of their paper which was
over and above what could be employed in the
circulation of the country, being likewise over
and above what could be employed in that circu-
lation, was sometimes sent abroad in the shape of
coin, sometimes melted down and sold to the
Bank of England at the high price of £4 an ounce.
It was the newest, the heaviest, and the best
pieces only, which were carefully picked out of
the whole coin, and either sent abroad, or melted
down at home. And while they remained in the
shape of coin, these heavy pieces were of no more
value than the light ; but they were of more value
abroad, or when melted down into bullion, at
home. The Bank of England, notwithstanding
their great annual coinage, found to their astonish-
ment, that there was every year the same scarcity
of coin as there had been the year before ; and
that notwithstanding the great quantity of good
and new coin which was every year issued from
the bank, the state of the coin instead of growing
better and better, became everv year worse and
worse. Every year they found themselves under
the necessity of coining nearly the same quantity
of gold as they had coined the year before, and
from the continual rise in the price of gold bullion,
in consequence of the continual wearing and
clipping of the coin, the expense of this great
annual coinage became every year greater and
greater. The Bank of England, it is to be
observed, by supplying its own coffers with coin,
is indirectly obliged to supply the whole king-
dom, into which coin is continually flowingfrom
these coffers in a great variety of ways. What-
ever coin therefore was wanted to support this
excessive circulation both of Scotch and English
paper money, whatever vacuities this excessive
circulation occasioned in the necessary coin of
the kingdom, the Bank of England was obliged to
supply them. The Scotch banks, no doubt, paid all
of them very dearly for their own imprudence and
inattention. But the Bank of England paid very
dearly, not only for its own imprudence, but for
the much greater imprudence of almost all the
Scotch banks. **

208. Whatever mav have been the case with
the Scotch banks at this period, Adam Smith has
most clearly misunderstood the phenomena
respecting the Bank of England. There is no
ground whatever given for the assertion that he
commences with, uiat the bank issued too great

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an excess of paper. Whatever quantity of paper
it issnedy mach or little, it must have been con-
stantly returning upon it for payment in gold,
during such a state of the coinage. When men
could pay in deficient coin at its full nominal
▼alue, and obtain notes from it payable on demand
in full weighted coin, which might be immediately
melted down and resold to it at the rate of £4
per ounce, the simplest knowledge of economic
science would shew that it must have suffered a
constant drain of gold, which mtut have gone on
constantly increasing, until it would certain-
ly in the end have caused the bank to stop
payment. The lonegr continued the efforts of the
bank were to supply gold coin, the more surely
was it bringing on its own ruin. The true
explanation of the phenomena described by Adam
Smith is to be found not in hypothetical excessive
issues of paper by the bank, but in the state of
the gold coinage.

209. In 1780, all Acts dating from Henry
VIII. forbidding the carrying of the gold and
silver coin into Ireland, were repealed.

210. Although the gold coinage had been
amended, the silver still continued in a very bad
state. In 1787, a new issue was begun, but sus-
pended after about £80,000 had been coined. At
this time the sixpences were deficient by about
one-third ; the shillings by about one-fourth ; the
half-crowns by about one-eighth ; and crowns less
80, and great quantities of counterfeit copper were
in circulation. This continued to get worse, and
in 1796, a new copper coinage ^came neces-
sary. In the following year the Government
contracted with the celebrated firm of Boulton
and Watt, at Soho, near Birmingham, to coin 500
tons of copper pennies, each coin to weigh an
ounce. Many specimens of this coinage are still
in circulation.

211. In 1797, there being a great deficiency
of silver money, Spanish dollars were issued with
a small stamp on them, but having been wrongly
rated, great quantities were imported and stamped
surreptitiously. The bank then called them all
in, and was obliged to pay the forged as well as
the true ones. & 1798, large quantities of light
gold being in circulation, the bank repeated their
advice by public advertisement, that the public
should weigh each coin presented to them, as none
but money of full weight could be received at the

212. On the 10th of February, 1798, a com-
mittee of the Privy Council was appointed to
take into consideration the state of ^e coinage,
and the constitution x)f the Mint, and to report to
the King such improvements in each as they might
think desirable. This committee referred it to Mr.
Henry Cavendish, and Mr. Hatchett, to examine
whether coin made of soft and ductile gold, or
of gold as hard as is compatible with the purposes
of coinage, suffers the most by wear, and also
whether coin of a flat, smooth, and broad surface,
wears less than coi9 which has protuberant parts,
raised above the ground of the pieces.

213. A detailed account oi the experiments
instituted to settle these questions is given in the
Philosophical Transactions for 1803. The experi-
ments were begun in the latter end of 1798, and
completed in April, 1801. Various alloys of gold
were tried— with arsenic, antimony, zinc, cobalt,
nickel, manganese, bismuUi, lead, tin, iron, emery,

copper, and silver. The result shewed tiiat silver
and copper were the only allovs fit to form gold
coin. All the others iinured the ductility of
the metal. The efiects of various alloys on the
specific gravity of gold were very remarkable.
The quantity of gold being taken at 18 dwts.
10 grs., with 1 ^vt. 14 grs. of various alloys,
made the specific gravity of the compound vary
from 19.277 to 16.627. Experiments were also
made to ascertain which alloy was the best, and
it was fully proved that the alloy of one-twelfth
of copper was the best. The wear also was
greater upon raised or embossed surfaces than
upon fiat and plain ones.

214. The Treatise on the Coins of the Reaim^
which Lord Liverpool afterwards published in a
separate form as a letter to the EJng, was intended
to be ofiered to this committee as a draft report.

In this letter, Lord Liverpool, after stating the
deficient condition of the gold money in 1774, and
its recoinage, says that the difilculty attending
the improvement of the silver coin was, that the
two metals were estimated at a diflferent value at
the Mint than they were generally sold for in the
market. That so long as this continned, only
that metal which is estimated at the lowest value
with reference to the other would be brou^t to
the Mint to be coined. A constant traflic m the
coins would go on, greatly to the loss of the public,
in consequence of every one being allowed to
bring any quantity of each metal to the Mint to
be coined free of expense.

215. Lord Liverpool then enforces the doc-
trine of Sir William Petty, Locke, Harris, and
other eminent writers, that the standard coinage
of the country should be made of one meUl
only, and that coins of this metal should be legal
tender without limitation. Subsidiary coins,
however, might be made of other metals for the
convenience of traffic, but these should be legal
tender only to a limited amount He then gives
a sketch of the history of the coinage of the
country, with the different relative values of gold
and silver. Locke had recommended silver as
the legal standard, but Lord Liverpool explained
the circumstances which had caused gold to be-
come in common usage the standard of payment
during the preceding century. He says, that
since 1717 to the end of the century, no more than
£584,764 17s. sjd. in tale of silver had been
coined, and from 1760 to 1800, a period of 40
years, not more than £63,983 158. 5d.

216. He recommended that gold should be
made the standard metal of coinage, with silver
and copper as subsidiary ones. That the sold
coinage should be legal tender to an unlimited
amount, and silver only for all sums below the

Sold unit. Similarly copper should be le^ ten-
or for sums only below the silver unit. The
char^ of workmanship should be taken out of the
inferior coins, because they would pass in pay-
ment at their nominal rate, or value, provided
their value in metal and workmanship was equal
to such nominal value. By taking the charge of
workmanship out of these silver corns they would
be retained in the country for the purposes of in-
ternal traffic, for no foreign merchant would take
his balance in such coins in payment of any sum
greater than they were made le^ tender for, as
their value in foreign countries would be less than
their nominal value. There could be no conflict

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between coins made of different metals, nor wonld
they be melted down fbr the purpose of being con-
verted into plate, as had frequently happened
during the course of the last century, whenever
the price of either gold or silver bullion in the
market rose above the Mint price.

217. This we may observe would be true only
as long as the difference in the market values of
the two metals did not become greater than the
sum charged for the workmanship of the silver
coinage. If, for instance, the vaJue of gold, as
metal, were to fall in comparison to that of silver,
to an extent greater than 6 per cent., which is as
nearly as possible the difference between the mar-
ket value of the silver and the nominal value of
the silver coinage, the same phenomena would
reappear, and demand a further reduction of the
quantity of silver in the shilling.

218. Lord Liverpool then gives some notions
on the paper currency, which we have considered
under the word Cubrenct, and many other most
valuable and interesting details relating to the

By experiments, it was found that the deprecia-
tion of the coinage by wear and tear had consider-
ably increased smce 1787. The deficiency in the
crown pieces now amounted to about 3^ per cent. ;
in the half-crowns to about U per cent; in the
shillings to about 30 per 'cent. ; and in the six-
pences to about 42 per cent. Acts were passed,
statutes 1798, c.59 and 1799, c. 75, to prohibit the
importation of light silver coin of the realm.
The bank again found it necessary to caution the
public against light gold, and to weigh all that
was offered in pavment, in consequence of the de-
preciated state of the coinage.

The Bank of England had issued Spanish dol-
lars stamped with a small king*s head, at some-
what above their market value, in consequence of
which numbers were imported, and the stamp
counterfeited. In 1 804, they tried another device,
but this was easily forged, and they attempted to
withdraw these dollars from circulation, but great
difficulty arose from the clerks not being able to
distinguish the true firom the false. Nay, even
the clerks at the Mint and the bank differed in
their opinion as to which were forged and which
were genuine. A new issue was made, stamped
at Mr. Boulton*s mint.

219. In 1809 and 1810, the gigantic commer-
cial speculations which were set afloat, and greatly
fostered by the extravagant issues of the Bank of
Sngland and the country banks, produced that
sudden rise in the market, or paper, price of gold,
And the disappearance of guineas, which gave rise
to the appointment of the Bullion Committee, and
the famous report which produced such interesting
discussions in 1 81 1. A full analysis of the report
is given under Bullion Report.

220. Few men of common sense can read these
debates, and think upon the vote of the House of
Commons now without shame. To the best of our
belief it stands unique in the annals of legislative
folly. Other legislatures have made severe laws
and enacted cruel punishments against those who
made a difference between paper and gold, but
not one that we are aware of, ever came to the
solemn resolution that a £1 note and one shilling
were the same thing as a Xl note and seven

221. On the 6th of May, 1811, Mr. Homer*

opened the debate on the Bullion Eeport, in a
speech which raised him to the greatest eminence
in public estimation. It abounded in valuable
details, though not fVee from some errors. He
concluded by moving the following resolutions: —

1 . *' That the only money which can be legally
tendered in Great Britain, for any sum above 12
pnence in the whole, is made either of gold or
silver ; and that the weight, standard, or denom-
ination, at which any such money is authorized to

Online LibraryHenry Dunning MacleodA dictionary of political economy: biographical, bibliographical ..., Volume 1 → online text (page 127 of 180)